Many individuals begin planning for retirement well in advance. Such planning frequently includes planning for the financial impact of the elimination of employment income and the addition of income from other sources, such as pensions or Social Security benefits. This financial planning also typically includes saving and investment decisions, as well as estimates of income required or desired during retirement. The decision of when a person should retire is also a key factor in retirement planning. This decision is generally a function of at least four major factors: (1) the amount of income a person needs or desires to draw in his retirement; (2) when that person will retire; (3) how much that person is able to save for retirement; and (4) how retirement funds are invested. Individuals have no control over the performance of financial markets, and the fourth factor is generally a hit-or-miss estimate based on a person's relative propensity for risk or security in his retirement investment portfolio. However, the myriad of investment choices and the relative safety or risk they present generally focus a financial planner's efforts on this fourth factor, with little or no attention given to the effects of the first three factors over which individuals have significantly greater control.
Generally, a financial planner will start to formulate a retirement plan with a questionnaire that establishes narrow parameters for the first three factors. The planner then focuses on the fourth factor to develop a financial retirement plan that serves the potential retiree's responses to the first three factors. Although even minor changes to any one of the first three factors can materially affect the assumptions inherent in the fourth factor, planners generally will not develop a plurality of plans that respond to those types of changes. When a plurality of plans are developed, they are limited to a few scenarios (e.g., three different retirement ages or high and low market performance levels).
Financial planners frequently utilize software tools to formulate retirement plans for their clients. As with other aspects of the typical retirement planning process, these tools focus on the fourth major retirement planning factor, namely, the mix of assets in a prospective retiree's account. Few, if any of the existing software tools facilitate changes to the other major factors that may affect a retiree's income. Instead, these prior art planning tools will include static entry fields for the retiree's desired income, projected retirement age, and current savings, which will then be used to devise a sampling of plans based upon those static factors. If the client wishes to change any of those other factors, the planner will need to run separate scenarios, each of which is based on different input factors. The client will then be presented with a plethora of static projections and will have little or no opportunity to see how those projections may change with changes to the other input factors. If the client requests additional information on how a change (such as buying a vacation home) may impact the projections, the financial planner must go through a time-consuming process of creating a new set of projections by entering the information for a new scenario into the software tool.
When financial planners attempt to develop more complex retirement plans, the time and effort required to produce new projections of different scenarios increases. For example, considering risk protection mechanisms and factoring in regular withdrawals may require producing multiple sets of projects for each scenario adjustment. Few existing software tools allow a financial planner the flexibility to vary multiple primary and secondary parameters in response to a client inquiry, and even those tools lack the capability to generate real-time projections or projection summaries to present to a client in response to changes in the parameters. The ability to generate and display “what if” scenarios in real-time for a sliding scale of changes and assumptions (e.g., postponing retirement by various lengths of time, increasing savings by various amounts prior to retirement, or adjusting life expectancy) is not available in existing retirement planning tools.